ArvinMeritor has witnessed phenomenal growth in the Asian region in the last few years and expects this growth to accelerate even further. The company has got all its businesses together in the APAC region and has put in place a very strong management team, focused on the region.
In a recent interview to Motorindia, Mr. Charles G.’Chip’ McClure, Chairman of the Board and CEO and President of ArvinMeritor Inc., spoke about the company’s plans for the Asian region, particularly the Indian market.
Mr. McClure started with this observation: “The Indian market is full of growth opportunities for ArvinMeritor. Our sales in India in 2006 reached $125 million, and we grew 36 per cent to push this figure to over $170 million in 2007. This year it is estimated that India will sell around 200,000 heavy trucks, making it the fourth largest heavy trucks market in the world. At present, the Indian commercial vehicle sales have recorded a growth of 4.4 per cent CAGR, and we foresee a 10 per cent growth in the next five years. We are confident of reaching the total sales target of $1 billion per annum from the Asia Pacific region, with India a major contributor. The goods hauling segment will be under some pressure in the near term. Fortunately for us, the heavy tractor and tipper segments wherein our products are very strong are still growing following heavy demand from construction, mining and infrastructure sectors”.
The Indian company, Automotive Axles, is a joint venture between ArvinMeritor and the Kalyani Group with its manufacturing facility at Mysore. It is the largest independent axle manufacturer in India. An OEM to Tata Motors, Ashok Leyland, Mahindra and Eicher, its revenues exceeded $200 million.
The company is already looking at expansion plans and adding capacity, not just for the Indian market, but would be supplying the products to other parts of Asia, including ASEAN and Australia.
Referring to expansion plans in India, Mr. McClure said: “In India, we are investing by expanding our existing joint ventures and have approved investment in a wholly-owned plant for our LVS body systems products. The plant construction work is apace, and we will occupy it with our manufacturing lines this summer in production by the end of the year. In 2008, we have planned to expand our commercial vehicle axles business in India. On the truck side our business is axles and brakes, and we have already a majority share of the Indian market. Automotive Axles in Mysore has been so successful in the last few years that we have significantly expanded operations and are planning another round of expansion for 2009”.
Growth in Asia
ArvinMeritor has doubled its revenues from the Asia Pacific since 2003, and profits have been markedly up, almost doubled in the region. Asia Pacific is probably one of the most profitable regions around the world for ArvinMeritor with close to 10 per cent in operating margin.
In 2007, ArvinMeritor revenues grew by 33 per cent in revenues in APAC, and in 2008 the company is targeting another 25 per cent growth. The growth is coming from across the board. The business in India is up 30 per cent, the aftermarket business in Asia-Pacific is up 30 per cent, off-highway axle business in China is up 40 per cent and even the doors business in Asia-Pacific, not including Japan, is up about 45 per cent. The phenomenal growth is partly because all these markets are growing. The other reason is that the segments in which ArvinMeritor operates are growing faster than the overall market. Currently, about three-fourths of the overall business is from commercial vehicles (CVs) and about a quarter from light vehicles (LVs) related products.
China contributes to about 45 per cent of Arvin Meritor’s APAC business. In China half the business comes from CVs and the half from LVs. India is one of the fastest growing markets and accounts for about 30 per cent of the APAC business. The company also has fairly significant business in Australia with good growth in other markets like Japan and Korea. The whole Asian region will witness tremendous growth over the coming few years.
In China, Arvin Meritor is expanding its off-highway axle and brake business that has grown considerably during 2007 and continues to be very strong in the current year. This is mainly because the construction markets in China, whether it is mobile cranes or loaders and excavators, have been incredibly strong and that strength is now being witnessed in India as well, although ArvinMeritor sells these products only in China.
Sourcing components
ArvinMeritor buys goods worth $3.7 billion globally, 20 per cent of which is sourced from low-cost manufacturing countries, including China and India. The company purchased goods worth $100 million (about Rs. 450 crores) from the domestic market last year and is likely to scale it up to $250 million this year.
“We are sure that in the near future India would play a major role in sourcing auto components for the company’s global operations. We are planning to increase our footprint in the region with regard to sourcing opportunities. We are confident that in the coming years around one-third of our business would come from the Asian region in which India would be a major contributor”, observed Mr. McClure.
R&D; centre
ArvinMeritor has established a technical centre in Bangalore for providing engineering support for its Indian and global operations. “To sustain the rapid growth of the company, we are in the process of recruiting more engineers at our technical centre at Bangalore. We are also inducting talent in the other support areas, including procurement which is another part of the ArvinMeritor’s Asia Pacific growth plan. This year we will house nearly 200 people in our Bangalore office, and we can easily see ourselves doubling our human resources in India by 2010”.
roup and our light vehicle group with companies such as Hino, Hyundai, Kia, Chery, Daewoo Motors, SAIC, First Auto Works, Ashok Leyland and Tata Motors”, added Mr. McClure.
